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July 25, 2024
Is this the year you rev up your car budget? If so, you have probably started looking at your finances, what you want, and what you can afford.
Budgeting for a car means putting a plan in place and considering all of the factors to help you buy or lease something you will love and something that fits your budget.
There are many things to consider before making the purchase. Aside from the color, style, and the fancy bells and whistles – savvy consumers also thoughtfully consider the bottom line.
With some people tightening their belts, consumers are holding onto vehicles longer and looking for alternatives to traditional purchases. Recent reports say even used cars, once thought of as more economical options, are seeing higher prices. So, what is best for you and your budget? The answer can be different, depending on several factors.
Just the thought of buying a car can make your heart race – it can be really exciting. Part of the process of learning how to budget for a car is understanding what you can actually afford, compared to what you might really love to have. Navigating the car buying experience will go much smoother, once you clearly know what fits into your overall financial plan.
UnitedOne Credit Union offers several tools to help as you plan your car purchase or to make other purchasing and budgeting decisions. Using our auto loan calculators gives you a better idea of your loan payment and how much car you can buy. This will assist you in approaching a car purchase with knowledge of where you are financially and define your budget before even visiting a dealership for a test drive.
Once you understand what you can afford, remember the other costs tied to getting a vehicle. The goal is to make sure you can stay within your budget and get reliable transportation.
Beyond the price in the window, here are some other considerations as you create your car expense budget:
Set aside extra cash for both expected and unexpected expenses.
It can be helpful to begin creating a budget for a car:
When all of the monthly costs are added up, you will get a better idea of what kind of car you can comfortably afford. Also, remember an offer of a low monthly payment doesn’t always mean a better deal for your bottom line. An offer of a lower payment could be because of a longer term loan or higher interest rates. This can mean you may pay much more for the car than you expected.
Have you thought about leasing? Depending on your situation and goals, leasing might work best for your specific situation. Before signing on the dotted line, think about your overall budget and long term money goals.
One of the advantages of leasing can be lower monthly payments than if you secured financing from a lender. Another is your out-of-pocket costs will be lower. When thinking about the outlet of cash, a down payment for a vehicle purchase can be as high as 20%. With a lease, there can be little to no down payment required.
Another consideration is repair costs. Since lease terms tend to be short, most repairs are covered by a manufacturer’s warranty.
Both leasing and buying can have advantages and disadvantages. The main point is to make sure you understand what you are getting yourself into and how your decision can impact your finances.
Budgeting for a car is a big decision. As you begin this process, it’s a great time to also look at your full financial picture. Keeping track of your income and expenses makes it easier to manage a major purchase like a car, while reducing the chance of getting off track financially. Use this to get a better picture of where you are and where every dollar is being allocated.
Be patient as you make a large spending decision like purchasing a car. Take the time you need to be confident about your choice.
This article is shared by UnitedOne Credit Union’s partner at GreenPath Financial Wellness, a trusted national non-profit.
Call or text UnitedOne Credit Union at (920) 684-0361 in Manitowoc or (920) 451-8222 in Sheboygan or email us at mail@UnitedOne.org.
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